no wonder the share price has performed dismally cant even get a webcast right
Printable View
no wonder the share price has performed dismally cant even get a webcast right
I am sorry I had to go out and help a family member so missed the web cast until 10 past 11.
Do not know whether anyone asked about eps growth.?
No I think they are up front about Australian growth driving the restructure,driven mainly by RELs,although they see other opportunities too.
They have been looking to lower their exposure from large loans, where they have competition from the major banks, to a lot of smaller loans.
So rural lending, including dairying, is now focused on livestock.
The out come of this, is as you point out, better margins,but I like the facts they lower their risks, and can recycle funds quickly,as the loans are for shorter terms..
Interesting were Chris Floods comments about motor vehicle lending.Still an active market,with much better quality lending ,with few poor loans.[TRA should be the same].
Suppose a morning AGM would have saved a few bob on the grog bill ....and probably reduced the numbers that attended.
[QUOTE=Beagle;729714]I hate it when people work out why I didn't attend lol.
Gone downhill.
4pm Friday afternoon was delightfull.?
"
Heartland Bank Limited (Heartland) (NZX: HBL) is pleased to advise that all resolutions put to shareholders at its Annual Meeting were passed."
Resolution 1: That the Restructure (details of which are set out in the Scheme Booklet) is approved
For: 333,558,468 (99.57%)
Against: 1,450,852 (0.43%)
Abstain: 9,484,391
Landslide Result
From late last week.
Yes a VERY solid endorsement indeed from shareholders with the voting. SP was too cheap at $1.66. Onward and upward now eh...SP might be back to mid-late $1.70's by as early as the end of this week !
Disc: Bought more OCA today and that's now #1.
yes big vote in confidence , now they just need to improve the dismal share price performance
http://www.scoop.co.nz/stories/BU180...le-funding.htm
Honest, it wasn’t me that asked the question about getting more younger digitally aware people on the Board ....the person even mentioned the current Board looks a bit old and needs refreshing.
Glad to hear Chairman say they are on the case ...ha ha
Whoever asked that question as to why 2 directors don’t own shares probably didn’t get an answer they wanted ...but the questioner was probably only trying to make a point
At least those two directors remain truly independent ...no vested interest and all that.
And a very popular site, clicking over 2m hits today :).
After reading the Chairman’s and CEO’s reports to the AGM, I am pleased with where we are heading with this Company. I think it was great that the restructuring found such a resounding favour with shareholders.
This will now allow the company to go ahead full steam into the Australian REL business by seeking the necessary wholesale funding and possibly some capital raising, to grow this business very fast. Responsibly, they also held the dividends at the same level as last year to give them more cash for growth. I wouldn’t mind them holding the dividend there for the next few years or even reduce it, but realise that wouldn’t go down well with all SH.
It is great that the focus with RELs will be in Australia where we already have a market leading position in a country where the over 65 yo are increasing by around 20,000 per month. Next year that population is expected to grow as much in numbers as the same NZ cohort will do in the next 10 years !
Good to read tat the debacle with the Oracle core banking system seems to be behind us but totally expect further issues, as is the norm with such systems that start giving headaches.
I like what they call the “best or only” policy where they want to be best in the market for a particular product or have the only product in the market, as they pretty much do with the RELs on both sides of the Tasman.
In line with that policy they have reduced their risk to big business loans where they have more competition from the big banks towards smaller and shorter loans to businesses, such as livestock to farmers and the “open for business” digital platform.
I am less enthused by the increasing use of words such as “community”, “culture” and “diversity of thought” but realise this seems to be the way things are heading today. HBL represents 21 ethnic groups for their staff. Wow ! Hope they are all capable, not just the right race or colour. My favourite comment from Jeff about this great community commitment was that HBL is striving to put “New Zealander’s into better cars and helping seniors live a more comfortable retirement”. Makes me feel really good being part of this business doing such wonderful things.
One thing I am unclear on is who will be the CEO of the new Heartland Group Holdings. I assume Jeff. Will he also be CEO of Heartland Bank ? I do note (and disagree with) that he is also to be a Director of both these companies. I question how wise that is.
Now we just need to see all of this turn very quickly into good growth in EPS
Discl: accumulating
I think HBL are a good company to have ownership in and have been thinking seriously about investing in them quite recently.
The one big disturbing factor that is stopping me in my tracks is Oracle.
I have worked for extensive periods in two companies that used it, and in my most humble of opinion it is a complete and utter sack of sh!t.
Systems like these can make or break companies. Jade nearly broke The Warehouse.
I have personally seen millions and millions being poured into Oracle year after year by the two companies I used to work for that used it. One of them finally cut their massive losses and threw the whole lot in the bin (as The Warehouse did with Jade) and started again. The other one, I don't know if they still use it or not.
Disadvantages:
Slooooooooow
Unreliable
Super user-unfriendly
Super duper expensive to implement
Super duper duper expensive to maintain.
Advantages:
None I can think of.
Maybe Oracle has improved from those times, but I can't bring myself to buy into HBL while they're using it.
I heard about the trouble & cost of this new system of HBL's long before I found out it was Oracle.... and when I found out, it all fell into place.
Finally a big day for the banks on the American markets overnight. They've been real laggards in recent months but a 2% index pop overnight.
Expecting a very good day for HBL shares today, (given the positive vote endorsement announcement was after the market closed yesterday).
Very, very close to my self imposed 10% portfolio limit already mate. (Note to self, no matter how tempting the opportunity I must, must, must stick to my own rules) Old dogs can learn new tricks and this one learned during the GFC never to stick your neck out too far with any one investment in case you're wrong and get a really serious hair cut.
I think this whole risk mitigation for my money, (portfolio spreading) is age related. When you're young you can afford huge risks and putting all or nearly all your eggs in one basket. At various stages of one's life the risk mitigation should start to come into play especially once one is within about 10 years or so from retirement or in semi retirement or retirement already. Hopefully by one's mid 50's for example, there's no real need to take untoward risks and one is already well positioned. (You reading this Couta1 ?).
Some people ran for the hills about 2 years ago when Trump was elected and I don't mind admitting I was one of them. It cost me a bit but I didn't stay out for long.
Yes Trump certainly was a "Black Swan" event we all got wrong.!
No the posters going 100% cash was well before that.
The trouble is that if I had held my previous undiversified approach I would be massively better off than I currently are, selling off my outrageous sized positions too early has been my biggest mistake.Lol.PS-I finally learnt my lesson and have held my XXXOS sized position in HLG for near a year now and refuse to be Beaglised out of it.PPS-I need to get back to investing like I ski.
Just got a letter from them telling me they are closing their Takapuna branch. All to be done by phone and internet from now on. If only they would improve their hopeless app.
I always fractionalise my term deposits so as to have staggered maturity dates. Unfortunately Heartland has a limit of ten term deposits. If you want more you need to have a separate head account with a new head account number. It is certainly a disincentive (for me) to add funds with Heartland. Would that be an Oracle database limitation or some other factor?
I have been to two presentations where Jeff Greenslade spoke of the issues they had with the new system.
Two months of hell.
However the key word was "had".
Now the systm is giving them the opportunity to do more of what they want to do.
Sounds to me as though "all is now well" with the Oracle system .
Hopefully any new system update is years away.
Something must be working just fine to achieve the huge growth in Aussie REL business.
[Maybe the phone.?]..lol.
I like Vaygor1 and have no reason to disbelieve him but I'm satisfied with the past tense reference direct from the horses mouth as posted by Percy below. I have had absolutely no issues with my call account with Heartland since opening it last year, really enjoying the special (for some customers) 3.0% call account return :D
Onward and upward eh Percy. :t_up:
I really hope as a shareholder it doesn't keep "teething" on us and that the $22 million spent on it proves its worth.Could be more clarity and detail clarifying its really fixed and not patched imo.
"Teething" problems after Oracle roll-out cost Heartland Bank ...
That shareholder who asked why his dividend had not increased this year got shortchanged in the answer he go.
We are growth mode and we’re holding more back for growth was the response in a rather gruff tone ....so there you stupid shareholder
Interesting the dividend payout ratio this year was much the same as last year (~75%) and as such the total dividend paid was $4m than previous year
The real reason for holding the dividend at 9.0 cents per share was the significantly increased number of shares......this reinvesting for growth is just a convenient story. More credence would be given tonthat story if they actually cut the dividend.
The very important question here is:
Were these two companies both financial institutions using the Oracle FLEXCUBE product or two companies whose software systems which used an Oracle database as the datastore?
If the former then may be it is an issue otherwise it is not.
Name a database and I can give you a few disaster stories involving them, though usually the problem was not the database per se.
Also closing their Hamilton Branch after spending heaps to refurbish it.
Hi Snow Leopard.
I agree with your sentiments and was aware upon posting that I may receive a response similar to yours. I am well aware that crap in = crap out when it comes to data and data-structure, and not necessarily the fault of the database engine itself.
The company that dumped their system was a hydrocarbons processing facility in NZ that employed an Oracle system as their Computerised Maintenance Management System (CMMS) and also made an attempt to implement Oracle HR. I think it was the failure of the Oracle HR rollout that was the straw that broke the camels back. Tens of millions spent but they had to cut their losses I think.
The company I worked for that may (or may not) be continuing to use their Oracle system was an Australian international Engineering and Design Company with offices in 80 countries employing about 40,000 staff at the time I left.
Around then (about 10 years ago) the main selling point of Oracle was the concept of a central repository for all data, and an engine that would not slow down even with massive data volumes.
The system was so cumbersome, slow, user unfriendly, and ugly (referring to the MMI... able to be tailored a bit but not in terms of real look & feel). Even the internal staff employed to maintain the system cost large sums of money (they had to have Oracle experience) and these staff would invariably form a 'Oracle is everything and nothing else comes close and MUST be banned' attitude, even with unrelated systems... likely due to (in my opinion) Oracle being their life, plus a healthy element of job protectionism.
Oracle may have come out with new products and new architecture since back then, but I assume they would always use their Engine which I imagine lies at the heart of their empire. I think I probably need to be personally exposed to an Oracle success story before reviewing my current feelings about them.
^^^ Lots of talk this boat had some pretty fancy Oracle software to make the comeback of all time...does that success story count :) https://www.cbsnews.com/news/oracle-...-americas-cup/
Only to be undone by a poxy flightless bird from some place down south no one has heard of https://en.wikipedia.org/wiki/2017_America%27s_Cup
The objective of this post is to consider cashflow, both in and out over the subsequent one year period after reporting date. This will help evaluate the ability of Heartland to repay debentures due for repayment in the 12 months following the end of year account reporting date.
The following information for FY2017 is derived from note 20 in AR2017 on 'Liquidity Risk'.
1/ Contractual information is extracted from the table titled 'Contractual Liquidity Profile of Financial Assets and Liabilities.
2/ Expected information is calculated by multiplying the 'Contracted' risk by the Expected Behaviour Multiple.
3/ The Expected Behaviour Multiple is derived from Heartlands own results, back in the day they printed both 'Contracted' and 'Expected' behaviour.
Loan Maturity Expected Behaviour Multiple FY2014 Financial Receivables Maturity: Contracted/ Expected FY2015 Financial Receivables Maturity: Contracted/ Expected FY2016 Financial Receivables Maturity: Contracted/ Expected FY2017 Financial Receivables Maturity: Contracted/ Expected FY2018 Financial Receivables Maturity: Contracted/ Expected On Demand 100% $50.254m / $50.254m $37.012m / $37.012m $84.154m / $84.154m $57.040m / $57.040m $49.588m / $49.588m 0-6 months 132% $477.190m / $629.445m $664.557m / $877.215m $743.389m / $961.274m $618.271m / $816.118m $609.268m / $804.234m 6-12 months 132% $367.564m / $483.727m $450.638m / $594.842m $484.420m / $639.962m $521.215m / $688.004m $469.632m / $619.914m
Note that in the above table, a 'loan maturity' represents an expected inflow of cash from a Heartland bank perspective.
Deposit Maturity Expected Behaviour Multiple FY2014 Financial Liabilities Maturity: Contracted/ Expected FY2015 Financial Liabilities Maturity: Contracted/ Expected FY2016 Financial Liabilities Maturity: Contracted/ Expected FY2017 Financial Liabilities Maturity: Contracted/ Expected FY2017 Financial Liabilities Maturity: Contracted/ Expected On Demand 3.01% $629.125m / $18.922m $748.332m / $22.450m $718.587m / $21.630m $836.829m / $25.189m $924.072m / $27.815m 0-6 months 32.4% $748.129m / $242.431m $1,213.450m / $395.102m $892.944m / $289.314m $1,191.957m / $386.194m $1,345.316m / $435.882m 6-12 months 36.4% $538.050m / $195.682m $686.159m / $249.762m $837.844m / $304.975m $729.145m / $265.409m $572.731m / $208.474m
Note that in the above table, a 'financial liability (debenture) maturity' represents an expected outflow of cash from a Heartland bank perspective.
If we now take the expected cash inflows and subtract from those the expected cash outflows we can examine the expected net cashflow from a 'one year in advance' perspective.
Deposit Maturity FY2014: 'Expected' combined Loan and Deposit Cashflow FY2015: 'Expected' combined Loan and Deposit Cashflow FY2016: 'Expected' combined Loan and Deposit Cashflow FY2017: 'Expected' combined Loan and Deposit Cashflow FY2018: 'Expected' combined Loan and Deposit Cashflow On Demand $31.332m $14.562m $62.524m $31.851m $21.765m 0-6 months $387.014m $482.113m $691.960m $429.924m $368.352m 6-12 months $288.045m $345.080m $334.987m $422.595m $411.440m Total $706.391m $841.755m $1,089.471m $884.370m $801.557m
Once again lots of numbers here. Now there are five years of consecutive data on display, we can start to get a view on what 'normal' numbers should look like. So what numbers in the above table(s) are worthy of further attention?
The purpose of this exercise is to work out if Heartland has an identifiable chance of running out of cash. The above table(s) are indicative of what might be expected to happen if Heartland management took a 'hands off the tiller' approach to cashflow management. Heartland management does not do this. Instead:
1/Heartland management is a frequent raiser of new capital. That boosts cashflow in.
2/ Heartland management can manipulate 'expected' behaviour of customers by offering higher interest rates for debenture depositors over time periods that cash is needed (for example).
So while the above tables will not be an accurate picture of what really happens to cashflow over the next twelve months, they are useful in hinting where deposit rates (a customer nudge factor) might be heading for 'current period' deposits.
A customer might not be happy if Heartland decides not to offer them a loan. But they will likely be even more unhappy if they have loaned Heartland money, be it in a short term debenture or a cash account, and Heartland does not have the cash to pay them back. Whether cash is available depends on the balance between cash coming into the company and cash going out. This 'balance' is reflected in the bottom table, and this is the table that deserves our attention.
If a cash depositing customer is denied their cash on maturity, this would be equally annoying whether it happened on a 6-12 month term deposit a 3-6 month term deposit or a cash deposit. So it is the individual figures in the tables that are important, not the totals. Even if an individual figure comes out negative (which none have), it is not certain that Heartland will default. It is not certain because 'expected' behaviour can be changed with incentives: Incentives like offering a higher than market interest rate for a defined period of management concern, for example.
The 'On Demand' net position outlook is the weakest since FY2015. This bodes well Heartland's 'on call' account holders who might expect the generous (with respect to finance industry peers) 'on call' rates to continue as a result.
The following current 'on call' rates, from institutions with comparable credit ratings, I have lifted from the 'interest.co.nz' website:
Heartland 'Direct Call' (no restriction) 2.75% Co-Operative bank ($100,000 minimum) 1.00% SBS bank ($100,000 minimum) 1.00% UDC Finance ($100,000 minimum) 1.00%
However with Heartland now committed to raising a lot more wholesale funding in Australia post restructure and with 'cash' balances an expected source of long term funding (sounds ironic but it is true!) I wouldn't be surprised if Heartland call interest rates in New Zealand are reduced significantly over the next twelve months, back to the level of their peers. I doubt you shareholders who voted for the restructure realised you were voting for the end of your generous call account terms in New Zealand going forwards, but I am calling it. Remember you read it here first!
Expected cashflow for the 0-6 months is the weakest on record. Granted it is still significant in absolute terms. So once again we can expect Heartland's rates offered for six month term deposits to be toward the top end of their comparative peer group.
Heartland ($1,000 minimum) 3.25% Co-Operative bank ($2,000 minimum) 3.05% SBS bank ($5,000 minimum) 3.25% UDC Finance ($5,000 minimum) 3.35%
And so it proves to be....
SNOOPY
Some canny investors entered into a special (I forget the exact name of it now) deal where they locked in their money for 4 months on term deposit then the deal was it rolled over into a special call account at the agreed rate of 3%. Once this new call sub account was up and running I then asked them if they minded if I transferred over my other funds in the 2.75% call account and they said fine, (I have 18 cents left in the 2.75% call account to keep it active, although they didn't mind if it went to 0). I expect they will be locked into that agreement to pay 3% because a deal is a deal but time will tell and anyway I'm losing "interest" in earning 3%. This bull market still has legs in my opinion.Quote:
However with Heartland now committed to raising a lot more wholesale funding in Australia post restructure and with 'cash' balances an expected source of long term funding (sounds ironic but it is true!) I wouldn't be surprised if Heartland call interest rates in New Zealand are reduced significantly over the next twelve months, back to the level of their peers. I doubt you shareholders who voted for the restructure realised you were voting for the end of your generous call account terms in New Zealand going forwards, but I am calling it. Remember you read it here first!
On another topic, isn't it nice to be allocated shares in lieu of dividend at $1.625 when the shares are now trading at $1.72. This will be an even more rewarding proposition when the shares trade up to my fair assessed value of mid $1.80's within 6 months or so, maybe earlier.
P.S. Just got this e.mail. Well picked Snoopy, (although to be fair there was some google driven advertising popping up on my screen yesterday pushing their call account rate at 2.50%).
Quote:
Hi there,
As a Direct Call Account holder we'd like to let you know about a rate change. We have reduced the rate from 2.75% p.a to 2.50% p.a effective 21 September 2018.
You will still enjoy the great features that our Direct Call Account provides:
No fees
Interest earned on every dollar
Unlimited withdrawals to your one nominated account
Regards
Mel Cadman
Head of Retail
Snoopy - Just received this email from Heartland "As a Direct Call Account holder we'd like to let you know about a rate change. We have reduced the rate from 2.75% p.a to 2.50% p.a effective 21 September 2018."
Good on you Snoopy - well spotted.
I've recently added HBL to my portfolio at an av of 1.70 as I like the Australian moves and think it is due for an upwards correction. I'm looking to increase the dividend yield side of my portfolio (which has been overly biased to cap gains.)
Dividend is in my bank.
Nice, extra shares allocated to my name on the register at $1.625, thank you Heartland.
i find it weird how my CFD account got the credit on the 7th September (the day after it went ex) but I'm not complaining.
imo the price has to get through to 1.80 before it could be considered bullish. at this point it may just be filling the (somewhat disputed) gap
Nice to see that Google was informed of the rate cut before 'the punters'. I didn't see the ad though, honest! Nevertheless it is interesting to see how studying something as esoteric as the current year cashflow can pay off.
Funnily enough you may still be better off earning 2.5% from the new Heartland Bank (with the Oz reverse mortgage assets carved off) than 2.75% from the old 'Heartland Bank'. That is because a large potential downside cashflow risk has been removed with the carve out of those Australian REL assets.
I reckon the 0.25% reduction in interest rate announced today is only the appetiser though. A new 2.25% rate to be introduced on December 21st just before Christmas? Sounds like a recipe for the main course, although it is unclear on which end of the knife you will find the turkey!
SNOOPY
Great to see a wise discussion on reverse mortgages in mainstream financial media and Mary Holm suggesting she may even get one herself, eventually. Of course Heartland gets a bit of free advertising https://www.nzherald.co.nz/personal-...ectid=12129348
Thanks for pointing that out. Looks like they round it up as based on a strictly arithmetic calculation I should have got xxx6.5046 additional shares but ended up being allocated xxx7 extra shares which is 0.4954 extra share at $1.625 = 0.805 extra value. Not exactly a free lunch but maybe a free half a can of diet coke :)
Time to update the "Liquidity Buffer ratio" for FY2018.
Dear old Colin has now 'left the building', but what better way to immortalise his contribution to society than continuing with the 'Meads Test', and the 'solid as' quote with which he will alwys be identified? When Colin told us all those years ago that a certain finance company was 'solid as' with reference to investing debenture money, the end result was that this cash became tied up in illiquid property developments. So although the company had enough money to pay out their debenture holders 'on paper' and appeared to be operating profitably, the debenture holders could not get their cash back. The 'Meads Test' (as coined by Snoopy) is one method of finding out if a finance sector company really is 'solid as'. The basic data I need to check this out has already been calculated (see above). So let's get going.
To check out the balance between monies borrowed and monies lent and matching up those maturity dates using a one year time horizon. The equation we are looking to satisfy is:
(Total Current Money to Draw On)/(Expected Net Current Loans Outstanding) > 10%
On the numerator of the equation, we have borrowings.
HLB Borrowings
1/ Term deposits lodged with Heartland. $2,881.805m 2/ Bank Borrowings $689.346m 3/ Securitized Borrowings total $47.504m 4/ Subordinated Bonds $3.378m 4/ Subordinated Notes $22.172m 5/ Unsubordinated Notes $151.853m Total Borrowings of (see note 13) $3,796.058m
Note 13 does not contain a clear breakdown of current and longer-term borrowing amounts and their maturity dates.
Banking facilities are provided by CBA Australia but for both Australia and New Zealand. These facilities are, I believe, in relation to the Australian part of the 'Seniors Reverse Mortgage Portfolio'. These banking facilities are secured over the homes on which the reverse mortgages have been taken out. These CBA loans have a maturity date of 30th September 2019. That means they are classed as ‘long term’ for accounting purposes (talking from a 1st July 2018 looking forwards perspective). And Heartland can’t rely on CBA Australia as a source of short-term funds.
The information given in note 13 on the securitized borrowing facilities is as follows:
Securitized bank facilities total all in relation to the Heartland ABCP Trust 1: $100.000m maturing on 31st August 2018 (*) less Current level of drawings against this facility $47.504m equals Borrowing Headroom $52.496m {A}
(*) I do not expect any problem in rolling this facility over for another year.
HLB Lendings vs HLB Borrowings
Customers owe HNZ 'Finance Receivables' of $3,984.941 There is no breakdown in AR2018 (note 11) as to what loans are current or longer terms. However, if we look at note 21 'Liquidity Risk', we can derive the expected maturity profile of total finance receivables due over the next twelve months.
On Demand 0-6 Months 6-12 Months Total Expected Receivables Due $49.588m + $804.234m +$619.914m = $1,473.736m less Expected Deposits for Repayment $27.814m + $435.882m + $208.474m = $672.170m equals Net Expected Cash Into Business $21.774m $368.352m $411.440m $801.566m {B}
If more money is coming in from customer loans being repaid, than is having to be repaid to the debenture holders, then this is a good thing for debenture holder liquidity. That is the case here.
Summing up:
(Total Current Money to Draw On {A})/(Expected Net Current Loans Outstanding {B})
= $52.496m / $801.556m
= 6.5% < 10%
=> Fail Short term liquidity test
Of course there are other ways to satisfy liquidity requirements. Issuing new shares or corporate bonds are two, and Heartland has done both in the past. But sometimes these are not options when market conditions change. This is why it is important to retain some 'headroom' with your existing borrowing arrangements. It appears that from the annual report, there is no indication there is enough.
SNOOPY
To answer my own question first.
Heartland ABCP Trust 1, are still part of Heartland's accounts (despite Heartland ABCP Trust 1 being independent) , because there must be some guarantee that I don't remember ever reading about (has it ever been disclosed?) that means "Heartland Bank" must share a significant part of any shortfall should the independent 'Heartland ABCP Trust 1' ever get into trouble. Thus even though the 'Heartland ABCP Trust 1' has been sold, it cannot be deconsolidated from Heartland bank.
I am looking at the 'Heartland ABCP Trust 1' again because it is one of those securitized loan vehicles that Heartland (and maybe not co-incidentally Turners) are very keen about. Heartland seem keen to roll up their Australian Reverse Mortgage loans into such structures. If things go well this means higher profits for Heartland, offset by a higher risk for 'Heartland Group' if things don't go so well. I for one will be very interested to see any Australian wholesale funding vehicle prospectus for funding Aussie RELs, because those might 'at last' reveal what kind of downside risk 'Heartland Group' could face. Yet back in New Zealand the 'Heartland ABCP Trust 1' vehicle used for packaging up and on selling loans to third parties ( i.e. creating securitized loans) seems to be winding down.
Heartland ABCP Trust 1 (facility available) CBS Warehouse A Trust (facility available) Total Facility Available Total Facility Drawn Total Facility Headroom Remaining FY2013 $400m $100m $500m $259m $241m FY2014 $400m $400m $229m $171m FY2015 $350m $350m $259m $91m FY2016 $350m $350m $284m $66m FY2017 $300m $300m $214m $86m FY2018 $100m $100m $52m $48m
Of particular note is the very sharp decline as at EOFY2018:
1/ In the size of the facility drawn.
2/AND the size of the facility available.
Now why would Heartland be reducing their securitized loans in New Zealand, while at the same time telling shareholders this is their preferred method of funding loans in Australia? Sorry to keep asking the awkward questions!
SNOOPY
Time to update the Heartland hunger for 'capital flow' table for the last six years:
Financial Year Capital Notes Issued during FY New Shares Issued during FY Total Shares on the Books EOFY Net Money Raised During FY (excl. Capital Notes) Dividends Paid ROE 2013 0 m 0 m 388.704m $0m $13.951m 7.2% 2014 0 m 75,562 m 463.266m $64.774m $19.930m 8.0% 2015 0 m 6,624 m 469.980m $9.163m $30.188m 9.9% 2016 0 m 6,579 m 476.469m $6.798m $37.690m 10.7% 2017 $22.000m 40.215m 516.684m $50.991m $41.977m 10.4% 2018 $150.000m 43.463m 560.147m $71.726m $47.895m 9.6% Total Cash Raised $172.000m $203.452m Total Cash Returned $191.631m
Notes
1/ The Australian 2017 'Subordinated Unsecured Capital Notes' issue for $A20m, which at $NZ1= =$A0.909c is equivalent to $NZ22m, was confirmed on April 7th 2017, and therefore issued in FY2017.
2/ ROE figures calculated using normalised earnings based on equity on the books at the end of the financial year.
If you add up the amount of capital that 'funding stakeholders' (bondholders and shareholders) have put into the business over the last five years, it exceeds the total dividend flow that Heartland has paid out over that same time period by $190m. Note that the six year time period I have chosen deliberately excludes the establishment capital raising that was used to create Heartland in the first place.
Winner commented on viewing the HBL AGM broadcast:
"That shareholder who asked why his dividend had not increased this year got short changed in the answer he got."
"We are growth mode and we’re holding more back for growth was the response in a rather gruff tone ....so there you stupid shareholder."
I would pose the follow up question: If you have paid out a 'net nothing', is it even possible to hold more earnings back?
The table shows, Heartland have been quite adept at raising new capital to the extent that all of the capital paid out as dividends (and $12m more) over the last six years has now been 'reclaimed'. And that figure does not include the money raised as capital notes!
Heartland management has been quite clever at pandering to the dividend hounds. Probably there are several holders of Heartland today who would not invest in Heartland if there was no dividend on offer, Some of the generous dividend is reclaimed immediately via the DRP. The rest is taken back later (not necessarily from the same individuals it was paid to) via share cash issues and bond issues. The net effect is that in the six years ended June 30th 2018, Heartland has paid out a net nothing. Yes the underlying business base has grown over that time, even if no net cash has been generated. Does this matter? As long as there are confident funding stakeholders willing to put up more cash, the Heartland business will continue to grow, But as soon as Heartland loses the confidence of its funding stakeholders, the cash needed to expand the business will dry up and growth will stop. And we all know what would happen to the share price if that were to happen. This is the primary reason I don't invest in Heartland. A great business will generate lots of cash. Heartland (still) generates none.
SNOOPY
Snoops
I would contend that Bonds/Notes are just another form of borrowing, debt rather than ‘capital’. As such shouldn’t form part of your reasoning
I would also contend that as 2014 capital raise was to fund Seniors acquisition and shouldn’t be considered in this discussion (creates your $40m more)
What would you conclude re shareholder capital raised and dividends paid if you started from 2015 or even 2016
I put the bonds in the table because they are an alternative fund raising mechanism to shares to raise funds from public stakeholders. However, they aren't central to the point I was making. Even if you leave all the bond money raised out of it, Heartland still hasn't generated any cash.
The purpose of my exercise was to look at how much cash has been generated by Heartland, excluding the cash injection at the time of Heartland's formation. I agree that if you leave out the capital created as part of the Seniors acquisition, that might turn the near $20m cash deficit into a near $20m cash surplus over the study period. But I don't agree with the premise for doing such a thing.Quote:
I would also contend that as 2014 capital raise was to fund Seniors acquisition and shouldn’t be considered in this discussion (creates your $40m more)
Seniors was acquired and around $40m of Heartland share capital was created as part of the acquisition process. There is no denying this did happen, and I can't see the attraction of looking at the Heartland history assuming no cash was created for buying Seniors. I also suspect that because the REL business has continued to grow, it is consuming more cash than it creates for Heartland. That isn't necessarily a problem if there are other arms of the Heartland business that do generate cash to cover the shortfall. But it does seem that this isn't happening.
Quote:
What would you conclude re shareholder capital raised and dividends paid if you started from 2015 or even 2016
Financial Year Capital Notes Issued during FY New Shares Issued during FY Total Shares on the Books EOFY Net Money Raised During FY (excl. Capital Notes) Dividends Paid ROE 2015 0 m 6,624 m 469.980m $9.163m $30.188m 9.9% 2016 0 m 6,579 m 476.469m $6.798m $37.690m 10.7% 2017 $22.000m 40.215m 516.684m $50.991m $41.977m 10.4% 2018 $150.000m 43.463m 560.147m $71.726m $47.895m 9.6% Total Cash Raised $172.000m $138.678m Total Cash Returned $157.750m
Around $20m of cash generated.
Note: ROE figures based on normalised earnings and shareholder equity at the end of the financial year
SNOOPY
OK Snoops, I think I misunderstood you earlier, or at least what you meant by ‘cash generated’
So last 4 years Heartland have got $139m cash from shareholders and given $158m to shareholders as dividends — yes?
Somebody did ask me during one of raises why are they asking for cash when they are just going to give it back to me in a months time. I replied yep doesn’t seem to make sense does it eh?
Suppose Heartland know what they are doing
I think Heartland have been quite clever in that their business model meets the needs of two types of shareholders.
1/ Dividend Hounds: These are catered for by offering a decent dividend yield, well above what those shareholders would get if they took that money and put it in a bank term deposit.
2/ Growth Hounds: These are catered for by having a DRP that allows shareholders to accumulate shares at a discount to market price in lieu of a cash dividend. This discount then expands with future share price growth, leaving the growth hounds happy.
Where the 'satisfy everyone' strategy starts to unravel is when the share price stops growing and the 'discounted' shares that the growth hounds receive go underwater. If as a result, shareholders pull out of the DRP, then this means less capital for the company to expand, decreased earnings relative to the lofty forecasts (made assuming more share capital would become available) and more weakness in the share price.
The REL business is good for profits, but bad for cashflow. Heartland needs a constantly increasing capital base. This is capital that the REL business can't generate from reverse mortgage payment holder interest payments (this interest is capitalised and so not available to Heartland as cashflow until the loan is terminated). Thus REL business growth will stall without access to new supporting capital: either more shares (dilutionary in eps terms) or more wholesale debt funding (which has its own liquidity risks). If the current 'cash generation' (as I put it) from normal operations is poor now, what do you think will happen when Reverse Equity Release Loans make up an even greater proportion of the Heartland's business?
SNOOPY
Yes, I guess that is another way to look at what I was saying. I am also saying that in some circumstances this does not matter.
But I am additionally saying that the DRP will only work with 'growth' investors if the share price keeps going up. And it will only work with 'dividend' investors, if the new capital issued is deployed so that 'eps' does not decrease.
All companies are looking to increase their 'eps'. There is nothing unique to Heartland here. But the path to 'eps' increase that Heartland have mapped out is to increase in a disproportionate way their Australian REL business. A side effect of going down that path is a 'new investment capital' squeeze. Up until now there has been no problem in raising new investment capital. But a change in the global financial environment could change the ability of HBL to raise capital. And that could unravel the business strategy going forwards as I see it.
SNOOPY
actually i think there model is really smart in regards to reverse mortgage.
make little money now as snoopy says , but as they build scale the borrowed money today will be dwarfed by the cash flow received in future years when these reverse mtges mature. so in future hbl should end up having huge csahflows.
I need to be quite precise with my language here. I believe that the Australian Reverse Mortgage Business is very profitable right now. But the profits are paper profits in the sense that they cannot be cashed up by Heartland until the loan is ultimately cashed in.
'Building scale' is all about growing the size of the reverse mortgage portfolio. Growing the REL portfolio means that HBL will always have poor cashflow, because as 100 loans are paid back in the future (say), Heartland will have to fund 200 new equivalent loans to keep the growth going. So I see no end to the cashflow issue, provided the REL portfolio keeps growing.Quote:
but as they build scale the borrowed money today will be dwarfed by the cash flow received in future years when these reverse mtges mature. So in future hbl should end up having huge cashflows.
Of course if the REL portfolio stops growing, then, at some time in the future (say ten-fifteen years) the cashflow situation will resolve itself. If Heartland were to decide to wind down their reverse mortgage portfolio in the future it would then become a cashflow generating engine for the company, the exact opposite of the situation now. But if the REL growth is halted, the earnings multiple that investors are prepared to pay for Heartland will go down. At that means the share price will shrink. Therein lies the 'balancing act' and the dilemma.
SNOOPY
Bit like the problems Warren Buffett's Berkshire Hathaway would have had, if they had started paying dividends years ago.!!
Good sort of problem to have.
Think it is best understood by those who understand how compound interest works...…………….lol.
Just re-reading an old Heartland report on the ABCP Trust 1, and found the admission of potential liability I had been seeking:
To give "a receipt of deferred purchase consideration" to be passed on to Heartland Bank.
I believe 'a receipt of deferred purchase consideration ' simply means the end line customer has not paid their bill! It certainly sounds much better than getting a bad debt though!
SNOOPY
I think you may be treating this issue as too much of binary situation rather than as a variable scale. Inflation alone would mean that simply replacing 100 matured loans with 100 new ones that there would be growth in absolute terms, not not in real terms, however the cashflow would be the equivalent of the compounded interest over the period of those loans. Increasing the number or value of loans by an amount equal to say half of the cash generated would achieve both cashflow and growth.
If you take the example of 'Berkshire Hathaways'' insurance business, then what we have compared with Heartland's REL business is exactly the opposite. Berkshire accepts cash up front in insurance premiums, in the hope they won't have to pay it out later. Heartland takes on a property debt up front and hope that they will get paid back later.
Warren takes the insurance premiums and uses that free cashflow to invest in all sorts of other businesses.
Heartland takes on the immediate cashflow obligation, then has to scratch around to find the money to pay it.
The two comparative business models are polar opposites from a cashflow perspective.
Compound interest will certainly mean more 'cash back' to Heartland once those reverse mortgages are discharged to be sure. But it will do nothing to improve cashflow in the interim for Heartland shareholders.Quote:
Think it is best understood by those who understand how compound interest works...…………….lol.
SNOOPY
At the FY2018 AGM, the soon to be 'Heartland Group' articulated their vision: a core focus on markets where they have a 'best product' or the 'only product'. Three areas in particular that Heartland see their growth coming from are:
1/ Reverse mortgages,
2/ Small business lending, AND
3/ Motor vehicle finance.
The objective is to keep Heartland remote from big bank competition. A substantial sum has been invested in a new Oracle 'Flexcube' (cost $22m to be amortised over 10 years) computer platform over the last two years. The aim is to expand reach through this new digital platform and growing intermediary networks.
Reverse Mortgages
On 31st October 2018, Heartland Group is planning to de-consolidate the The Reverse Mortgages Australia business into a new subsidiary 'Heartland Australia'. The Australian REL business has had asset growth of 31% over FY18. The consolidation into an entity separate from the NZ registered 'Heartland Bank' is to allow for a more aggressive funding regime than would be allowed under NZ Reserve Bank oversight of 'NZ banks'. Heartland is continuing to broaden their intermediary network of brokers in Australia. The Australian Reverse Mortgage business receivables ledger totals $NZ677m (+31% yoy) on balance sheet date. The Australian subsidiary will also administer Personal lending and small business lending, through 'Harmony Australia and to SMEs through 'Spotcap Australia' and Heartland's own digital platform O4B (more details on this later in this post). Heartland is the third largest player in the Australian reverse mortgage market with a market share of 11.5% (researched by IBIS World).
Heartland make much of their 'Canstar' provider of the year win over all other Australian reverse mortgage providers. But what features allowed them to take out this award? In no particular order of importance canstar noted:
1/ The loan has no ongoing fees.
2/ Potential customers were offered an 8 hour approval turnaround (typical industry time 25 hours).
3/ Allow a partner who is not the lead person named in the loan to remain living in the property even if the property owner has passed away.
4/ Offer an 'equity protection option', where you could choose to protect a percentage of the eventual net sale proceeds of your home.
How does Heartland Seniors Finance in Australia compare with other reverse mortgage providers? An excellent overview of the Australian Reverse Mortgage market may be found here:
https://download.asic.gov.au/media/4...ugust-2018.pdf
Percentage of House Value Available, age 60 Percentage of House Value Available, age 80 Maximum Available New Loan Market Share (2013-2017) Commonwealth Bank (var 6.37%) 20% 35% 40% 68% P&N Bank (var 6.24%) 20% 35% 35% small% Heartland Seniors Finance (var 6.29%) 15% 35% 45% 12%
Westpac and Macquarie pulled out of the Australian reverse mortgage market in 2017. The total size of the reverse mortgage market in Australia (including legacy players with around 20% market share) was $2.5b (December 2017). There is further competition from the government operated 'Pension Loan Scheme'. From 1st July 2019, the scheme will be broadened to allow people to borrow to create an income stream 50 per cent higher than the full pension (including supplements). The advantages include the interest rate of 5.25 per cent (typically 1% lower than the private providers). Finally, income from the Pension Loans Scheme will not affect Centrelink benefits such as the age pension. Private reverse mortgages can affect the pension because of the income test from either an income stream or deeming rates applied to a lump sum.
Meanwhile back in New Zealand, the reverse mortgage business ledger in this country totalled $453m , up 12% year on year. Heartland is the largest reverse mortgage player in the NZ market (as researched by Cameron Partners). The only other bank player who advertises reverse mortgages is 'SBS Bank', with their 'SBS Advance' product. Reverse mortgage interest rates are variable, with Heartland currently charging 7.82%. (SBS are currently lower at 7.55%). There is a maximum percentage of the value of the house you can borrow.
Percentage of House Value Available, age 60 Percentage of House Value Available, age 80 Maximum Available SBS Bank (var 7.55%) 5% 30% 50% Heartland Bank (var 7.82%) 15% 35% 40%
We can see that Heartland's key advantage in NZ is 'more money available earlier'.
Small Business Lending
'Heartland Bank' will continue to operate as the other fully owned subsidiary of 'Heartland Group'. Heartland Bank claim to have NZ’s largest platform for small business lending. The on-line part of this customer focus is named 'Open for Business' or 'O4B' for short. Loan approvals may be given fast 'on line'. Asset growth on the 'O4B' business unit, loan book now $100m, was reportedly up 98% over FY18. $1,066m worth of 'business receivables' are on the balance sheet as at 30-06-2018 (EOFY2018), including working capital and plant and equipment financing outside of the O4B interface. Heartlands 'best rate' for unsecured small business loans is 9.5% per annum, but may be as high as 16% p.a. 'depending on a range of factors'. For comparison
Receivables Balance Best Interest Rate ANZ NZ Business Bank Business Services' Receivables 31-09-2017 0.1854 x $15,846m = $2,938m 9.5% Westpac NZ Business Bank Property & Business Services' Receivables 31-09-2017 $1,120m + $389m = $1,509m 13.95% ASB NZ Business Bank 'Other Personal Loans' Receivables 31-09-2017 $1,719m 10.17% Heartland Bank Balance Sheet 'Property & Business Services' Receivables 30-06-2018 $110.385m 9.5%
It is clear that Heartland are not a big three player in 'business lending'. But they are specialising in 'small business'. It is difficult to get total market figures for 'small business' funding, because so many small businesses are financed by mortgages on homes. It is possible to take out an ordinary mortgage on your house without telling the bank you are funding a business venture with it. Heartland are not concentrating on retail house mortgage funding business loans. But they are committed to the SME market. They also seem 'interest cost competitive'.
The other competitive advantage that Heartland tout is that loans can be rapidly approved (within minutes) over the net using their new banking software. Has anyone on this forum had a business loan approved in this way? I tried it myself, but they answer was 'we will get back to you'. And that sounds like the loan approval process of any other bank!
Motor Vehicle Finance
Motor vehicle financing is stronger, helped by Heartland's intermediated strategy and distribution relationships with Holden, Jaguar Land Rover and AA Finance. Motor vehicle financing sat at $955m as at FY2018 balance date. For comparison purposes:
Receivables Balance Change Since FY2016 Heartland Bank Balance Sheet Receivables 30-06-2018 $955m +180% MTF Balance Sheet Receivables 31-03-2018 $651.738m +22% Turners Automotive Group Balance Sheet Receivables 31-03-2018 $289.799m +100%
As a specialist lender targeting the motor vehicle sector, the growth in Heartland loans to this sector has been astonishing. Their loan book is much larger than the long established MTF financing and they are growing much faster than 'fast growing leader' in the pre-owned vehicle market, Turners Automotive Group. Well done Heartland!
Other Sector Comment
In rural lending, Livestock financing is up 62% in FY2018. Larger rural relationship-managed lending, with the bigger banks increasingly moving into this end of the market
market. So total rural funding is down, the receivables book total being $656m at EOFY2018.
Conclusion:
Pass Test
SNOOPY
Skimmed through this book while at a friends house the other night. Very interesting
Hope Heartland guys have read and got some insights from it
Emotional Banking: Fixing Culture, Leveraging FinTech, and Transforming Retail Banks into Brands
By Duena Blomstrom
Eagle eyed readers will note that I have revised some of my assumptions on what one off items are taxable or not.
Financial Year Net Sustainable Profit (A) Shares on Issue EOFY (B) eps (A)/(B) 2014 $36.039m + $0.056m = $36.095m 463.266m 7.8c 2015 $48.163m - $0.588m - $0.098m = $47.477m 469.980m 10.1c 2016 $54.164m - $1.136m - $0.322m = $52.706m 476.469m 11.1c 2017 $60.808m - 0.72x$1.2m - $0.628m - $0m = $59.316m 516.684m 11.5c 2018 $67.513m + 0.72x$1.3m - ($4.8m + $0.6m) -$0.156m - $0m = $62.893m 560.587m 11.2c
Notes
1/ Property plant and equipment sale loss of $56k added back into FY2014 result.
2/ Profit of $588k from investment sale and $98k from Property Plant and Equipment sales removed from FY2015 result
3/ Profit of $1.136m from investment sale and $322k from Property Plant and Equipment sales removed from FY2016 result
4/ Profit of $0.628m from investment sale removed from FY2017 result. A $1.2m insurance write back that made the impaired asset expense for FY2017 unusually low and hence artificially inflated profits has been removed from the FY2017 result (refer FY2018 annual report).
5/ Profit of $0.156m from investment sale removed from FY2018 result. The after tax effect of $1.3m in 'one off costs' (system integration $0.5m, legacy system write off $0.3m and corporate restructure $0.5m) have been added to the FY2018 profit. Profits from the sale of the 'bank invoice finance business' of $0.6m and $4.8m recovered from a legacy MARAC property loan have been removed from the FY2018 profit.
6/ I have been unable to locate property plant and equipment sales profits/losses for FY2017 and FY2018.
Result: Pass Test
SNOOPY
Financial Year Net Sustainable Profit (A) Shareholder Equity EOFY (B) ROE (A)/(B) 2014 $36.095m $452.622m 8.0% 2015 $47.477m $480.125m 9.9% 2016 $52.706m $498.341m 10.6% 2017 $59.316m $569.595m 10.4% 2018 $62.893m $664.160m 9.5%
This shows a major weakness of Heartland, with return on Equity a long way short of target guidelines. The relatively low ROE is exaggerated by raising capital throughout the year, through the simplified calculation method I have used. But this is as it should be in my opinion, as constantly raising new capital from shareholders is another undesirable corporate trait.
Result: Fail Test
SNOOPY
Financial Year Net Sustainable Profit (A) Gross Interest Revenue (B) Net Profit margin (A)/(B) 2014 $36.095m $210.297m 17.2% 2015 $47.477m $260.488m 18.2% 2016 $52.706m $265.475m 19.9% 2017 $59.316m $278.279m 21.3% 2018 $62.893m $309.284m 20.3%
Before the glitch this year it looks like a one way increasing trend. A very commendable result.
Result: Pass Test
SNOOPY
The conclusion I have come to today mirrors my FY2016 perspective conclusion.
We have been here before, so I will repeat myself in response too.
Contrary to two years ago Heartland does have a plan to issue Heartland Bonds mainly in Australia. This may drive ROE up for the overall Heartland Group in the future. However, today is today, and I feel it more conservative to consider Heartland as a pure 'dividend play'.
Heartland fails the 'Buffett Test' by virtue of falling at hurdle three. But it may yet prove a good investment from a dividend perspective. Let's see.
SNOOPY
Year Dividends Paid 'per share' Significant Event During Year' FY2013 1.5cps(sp) + 2.0cps 17th December 2012: Heartland becomes a bank FY2014 2.5cps + 2.5cps 1st April 2014: Seniors 'Reverse Mortgage' Business Acquired FY2015 3.5cps + 3.0cps 10th September 2014: invests in Harmony P2P startup 28th October 2014: Credit rating upgraded from BBB- to BBB (Fitch Ratings) FY2016 4.5cps + 3.5cps FY2017 5.0cps + 3.5cps FY2018 5.5cps + 3.5cps FY2019 5.5cps + ?.?cps Average FY2015 to FH2019 inclusive 8.33cps
I have chosen to use the last four and one half years of operation as indicative, as these years include the full contribution of the Reverse Mortgage Portfolio, a critical component of Heartland going forwards.
SNOOPY
Plugging in a representative yield of 7.5%, one that IMO represents an appropriate risk for the ups and downs of the banking cycle of Heartland in its current form, we can now arrive at our 'Capitalised Dividend Model' valuation
(Representative Dividend per Share) / (Acceptable Gross Yield) = Share Price (an algebraic manipulation of: Dividend per Share / Share Price = Yield )
8.333c / (0.72 x 0.075) = $1.54
A reminder here that NTA was
($664.160m - $74.401m) / 560.587m = $1.05 cps
at balance date. This means my fair valuation is at a good premium (+46%) to asset value.
This $1.54 valuation is measured at the average point in the business cycle. My rule of thumb is that over the business cycle the actual share price will fluctuate between 80% and 120% of capitalised dividend fair value. This gives a target range of $1.23 to $1.85. Given where we are in the business cycle, $1.73 looks fair value today. Given the sweet spot in the business cycle today for shares, I think $1.85 over the next twelve months is a target that Heartland could get to. I don't see compelling value at $1.73 though. But if the share does drift back towards my fair value mid point of $1.54, that might be the time to -finally- add HBL to my portfolio.
SNOOPY
Tried to get a Heartland mistake fixed today.
Internet banking broken, the new App broken and the nice guy at the other end of phone has to write things down because the whole system broke ...and he promises to rectify the mistake when he can so I don’t gave to worry
The nice guy did let slip the system is a bit unreliable
Oh well .....Oracle works fine I’m told
Nothing wrong with Oracle as a relational database management system. It's the bits between you and the database that are likely the problem
I was trying to do online banking with Heartland this morning and got Apache error pages. Apache is is a widely used web server with a good reputation for reliability so it is unlikely that is the problem.
One of the problems dealing with Oracle is Larry. If he wants to buy another Hawaiian Island and decides you are the customer who is going to pay for it you are in trouble.
Boop boop de do
Marilyn
PS. Off topic ramble: The Coalition Government missed a golden opportunity with the Chief Technology Officer appointment omni-shambles. They should have used the salary to hire top relational database or system analyst talent with the remit to walk into development meetings with a baseball bat on their shoulder to discourage bureaucrats and suppliers from repeating c---k ups like Novapay or Incis.
Perhaps loading Maori as a tab at the top of the home page so the whole website can be viewed in Maori has blown Oracles systems lol.Quote:
Tēnā koe,
Internet banking and the mobile app are currently unavailable while we resolve a technical issue.
We'll post updates here when we have them.
Thanks for your patience,
The Heartland Team.
Not sure why they can't actually give me a greeting in English that I understand...is that too much to ask ?
Internet banking up and running again, that's good.
Sort of smiled about digital technology strategy when business is done over the phone with the banker writing the problem down in his pad with a pen
Problem not fixed so must have lost his pad
Oh well another call needed ...not cool
Original problem is a Heartland guy not doing what he said he would do
$1.64, much cheaper than the start of the year when it was nearly 50 cents more expensive
Nearly cheap enough for me to consider jumping back in
Hoop would say well and truly in bear territory .....25% off its recent high and trading below 200MA. Quite a wealth destroyer of late eh
Like it or not Heartland have been tainted with the fall out from the Aussie banks fiasco and as such is going through ax rerating process. Probably about fair value at the moment but if Aussie banks continue to decline well you never know where Heartland might end up.
HBL almost as big an enigma as that great Australian finance company Flexigroup
Looking at the big chart picture I must concede it still has a head and shoulders look to it and now looks like it might break down below the right shoulder. Hoop would probably say that happens far more often than not. I reduced last week at $1.73 having successfully stripped the dividend...playing "possum stuck in the headlights" with the rest and hoping its the light at the end of the tunnel I see not a train coming to run me over lol.
Financials worldwide under pressure at present plus the Aussie bank fiasco doesn't help that's for sure.
Industry Group Risk
From AR2018 note 19c, the greatest 'business group' risk in dollar terms is agriculture, with $740.798m worth of assets. This represents a decrease of $16.206m over the previous year.
$740.798m/ $4,390.423m = 17% of all loans
This decrease is possibly due to Heartland declaring that they are moving away from 'larger relationship managed lending' (code for 'lending on farms') to strengthening the livestock lending proposition.
Regional Risk
From AR2018 note 19b, the greatest regional area of credit risk in dollar terms is 'Rest of the North Island' , with $1,121.983m worth of assets. This represents:
$1,121.983.m/ $4,390.423m = 25.6% of all loans
The 'Rest of North Island' loans (which excludes Auckland and Wellington) have risen 8.1% in numerical terms over the year, behind the growth of the previous largest region Auckland which grew by 13.6% in gross loan amounts (Auckland still covers 24.4% of all loans). The increase in regional lending in the NI is an interesting and surprising contrast given the consummate decrease in rural lending.
The multi-year picture is shown below:
2012 2013 2014 2015 2016 2017 2018 Largest Regional Market Auckland (30%) Auckland (30%) Auckland (25%) Auckland (26%) Rest of NI (25%) Rest of NI (26%) Rest of NI (26%) Largest Industry Group Market Agriculture (24%) Agriculture (21%) Agriculture (16%) Agriculture (17%) Agriculture (18%) Agriculture (19%) Agriculture (17%)
Overall Heartland looks less risky than at any time in its history (bar 2014) from a 'Customer Concentration Test' perspective.
SNOOPY
LOL you ruffled my feathers, (opps sorry fur) last time you posted that mate for which I am in your debt because you scared me out of quite a bit of my holding at $1.73 ex divvy. Financials are vulnerable in a big market correction so maybe $1.40 is possible with a full blown overseas correction of circa 10- 15%.
It’s Peat’s chart. I just added the pendant (from Lovisa)
Hard to believe that such a great company with growing profits and steady dividends can see its share price fall by 24% in 9 months. Suppose that’s what happens when a stock goes from being outrageously overvalued to something closer to a reasonable value
And as often happens things often overshoot ....thats when you get your $1.40
LOL thanks Peat, such a memorable pendant...looks like something KW would wear :) Yes mate as you suggest things do overshoot in both directions but I suspect if it does get down to $1.40 there will be plenty of other things to worry about as well so that's not something I want to see.